Tax haven alert: Mauritius blamed for heavy taxes on the average Kenyan
Kenyans blame the island economy for a high tax incidence on the common man through heavy consumption taxes such as value added tax (VAT), as big companies are not contributing enough to the government coffer and corporate tax collections are taking a hit. (Image: Nairobi Digest)
Mauritius is among the countries being blamed for allowing companies operating in Kenya to evade taxes, according to a lobby composed of ten civil societies from three East African countries.
Several multi-billion shilling worth indigenous business in Kenya`s financial services sector are owned by parent companies domiciled in Mauritius, with the aim of cutting down on their tax obligations to Kenya, where corporate taxes are levied at 30%.
It may be noted that Mauritius has no capital gains tax and has a low tax regime, levying only 15% tax rate across corporates and individuals.
The double taxation avoidance agreement entered between the two countries ensures that the multinationals that are registered in the offshore jurisdiction of Mauritius are either paying little or no taxes to the government of Kenya despite making huge profits.
Accordingly, Kenyans blame the island economy for a high tax incidence on the common man through heavy consumption taxes such as value added tax (VAT), as big companies are not contributing enough to the government coffer and corporate tax collections are taking a hit. To compensate for low corporate tax collections, the individual tax levy is being increased, penalizing the average Kenyan.
“While large multinational companies are receiving tax incentives and not paying their fair share of tax, citizens are bearing a disproportionate tax burden due to an over reliance on consumption taxes, such as VAT on essential goods in revenue collection,” according to the petition.
As a result, essential goods get more expensive, poverty has increased, inequalities have exacerbated and social welfare is reduced.
“Double Taxation Treaties have turned into ‘double non-taxations’ tools, easily exploited by multinationals who engage in ‘ treaty shopping’ to get a better deal. These deals often are at the disadvantage of the underdeveloped and developing nations in Africa.” the lobby said.
“Mauritius is Africa’s own ‘tax haven’ and part of the problem,” it added.
Finally, the lobby is now seeking a review of the tax treaties entered with countries such as Mauritius, which are estimated to cost Kenya over $1.1 billion in revenue every year.